Books of Original Entry (An Introduction)
Books of Original Entry (An Introduction)
Books of Original Entry include all journals, the Cash Book and the Petty Cash Book.
NB: The Cash Book is both a Book of Original Entry as well as part of the Ledgers.
The Journals
The journals are referred to as Books of Original Entry, Books of Prime Entry, Subsidiary Books or Day
Books.
Purchases Journal
Sales Journal
Return Inwards Journal
Return Outwards Journal and
General Journal
The Purchases Journal is used to record all credit purchases. All entries in this journal are Debit entries
and the corresponding Credit entries will be placed in the Creditors Accounts in the Purchases Ledger.
The total of the Purchases Journal will be transferred to the Purchases Account in the General Ledger at
the end of the month. Alternate names for the Purchases Journal are the Purchases Book or Purchases
Day Book.
The Sales Journal is used to record all credit sales. All entries in this journal are Credit entries and the
corresponding Debit entries will be placed in the Debtors Accounts in the Sales Ledger. The total of the
Sales Journal will be transferred to the Sales Account in the General Ledger at the end of the month.
Alternate names for the Sales Journal are the Sales Book or Sales Day Book.
The Return Inwards Journal is used to record all return inwards. All entries in this journal are Debit
entries and the corresponding Credit entries will be placed in the Debtors Accounts in the Sales Ledger.
The total of the Return Inwards Journal will be transferred to the Return Inwards Account in the
General Ledger at the end of the month. Alternate names for the Return Inwards Journal are the Sales
Returns Book or Sales Returns Day Book.
The Return Outwards Journal is used to record all return outwards. All entries in this journal are Credit
entries and the corresponding Debit entries will be placed in the Creditors Accounts in the Purchases
Ledger. The total of the Return Outwards Journal will be transferred to the Return Outwards Account in
the General Ledger at the end of the month. Alternate names for the Return Outwards Journal are the
Purchases Returns Book or Purchases Returns Day Book.
Purchases Journal
DATE DETAILS Folio Order No. Amount
$
Sales Journal
DATE DETAILS Folio Invoice No. Amount
$
The General Journal is the Diary of the business. It is used to provide details (clarification) on particular
transactions when needed. Such details will be stated in the narrations.
The account(s) to be debited will be listed first and will be written at the MARGIN, while the account(s)
to be credited are mentioned after and are INDENTED. The Narration is a Brief Description of the
transaction.
Example
Post the following transactions in their respective journals
On Nov. 1, 2020 Mr. Brown started keeping records for his business. He ascertained that the business
had a motor car worth $10,000, office equipment $7,800, stock $5,740, Debtors – H. Richards $3,260,
P. Blake $2,700, Bank $1,900, cash $650, creditors P. Lewis $2,570 and M. Allen $1,930.
Nov. 2 Sold goods on credit to Y. Harris $2,200 and E. Campbell $3,800
Nov. 5 Bought furniture on credit from Amazing Offices Ltd for $4,000
Nov. 9 Returned $500 worth of goods to P. Lewis
Nov. 12 Bought goods on credit from F. Mason $4,380
Nov. 16 He wrote P. Blake’s debt $2,700 off as bad
Nov. 21 Y. Harris returned goods valued at $300
Nov. 27 Bought goods on credit from R. Gordon $1,400
Nov. 30 H. Richards gave him second hand office equipment in full settlement of his debt
Mr. Brown’s
General Journal
DATE DETAILS FOLIO DR $ CR $
2020
Nov. 1 Motor Car GL 10,000
Office Equipment GL 7,800
Stock GL 5,740
Debtor – H. Richards SL 3,260
- P. Blake SL 2,700
Bank CB 1,900
Cash CB 650
Creditors – T. Lewis PL 2,570
- M. Allen PL 1,930
Capital GL _____ 27,550
Entries on November 1 to open the books 32,050 32,050
Nov. 5 Furniture GL 4,000
Amazing Offices Ltd GL 4,000
Bought furniture on credit
Nov. 16 Bad Debt GL 2,700
P. Blake SL 2,700
Bad debt written off
Nov. 30 Office Equipment GL 3,260
H. Richards SL 3,260
Received second hand Office Equipment in full
settlement of debt
Mr. Brown’s
Sales Journal
DATE DETAILS Folio Invoice # Amt. $
2020
Nov. 2 Y. Harris SL 1001 2,200
Nov. 2 E. Campbell SL 1002 3,800
Nov. 30 Total Credit Sales transferred to Sales A/c GL 6,000
Mr. Brown’s
Return Outwards Journal
DATE DETAILS Folio Note # Amt.
$
2020
Nov. 9 P. Lewis PL 2501 500
Nov. 30 Total Return Outwards transferred to Return Outwards A/c GL 500
Mr. Brown’s
Purchases Journal
DATE DETAILS Folio Order # Amt.
$
2020
Nov. 12 F. Mason PL 911 4,380
Nov. 27 R. Gordon PL 912
1,400
Nov. 30 Total Credit Purchases transferred to Purchases A/c GL 5,780
Mr. Brown’s
Return Inwards Journal
DATE DETAILS Folio Note # Amt.
$
2020
Nov. 21 Y. Harris SL 258 300
Nov. 30 Total Return Inwards transferred to Return Inwards A/c GL 300
NB: The only time the General Journal is totalled is when it is being used to record opening entries. All
other entries are independent and therefore no total is calculated at the end of an accounting period.
The capital figure in the opening entries was arrived at by applying the accounting equation.
Capital = Assets – Liabilities
NB: The double lines in the centre of the Cash Book separates the Debit Side form the Credit Side.
Items (amounts) that would be Debited in the Cash A/c (#1) should be entered on the Debit Side of the
Cash Book under the Cash column.
Items (amounts) that would be Credited in the Cash A/c (#2) should be entered on the Credit Side of the
Cash Book under the Cash column.
The similar process applies to the Bank A/c (re: #’s 3 and 4).
NB: Like the Cash and Bank a/cs the Debit side of the Cash Book (Cash Column) is balanced off
against the Credit side of the Cash Book (Cash Column). The Debit side of the Cash Book (Bank
Column) is balanced off against the Credit side of the Cash Book (Bank Column).
The Discounts Allowed and Discount Received columns are EACH totalled and transferred to the
Discounts Allowed and Discounts Received A/cs respectively in the General Ledger. They are NOT
balanced off against each other.
Petty Cash payments are managed by the Petty Cashier. The Petty Cashier will be issued a particular
sum from which to spend at the start of the initial accounting period. This is referred to as the FLOAT.
Petty Cash is operated using the Imprest System meaning that the Petty Cashier will be given back
(reimbursed) at the end of each accounting period an amount equal to the amount spent during the
period. This will restore the amount the Petty Cashier has, back to the original amount he started with
(the Float).
The layout of the Petty Cash Book will vary for different businesses. However Petty Cash Books
generally have Analytical columns which group payments for similar expenditures under the same
analysis column.
Reimbursements may be done at the end of an accounting period (before the balancing off is done) or at
the start of the new accounting period (after the balancing off is done).
The Analytical Petty Cash Book
Amount Folio Date Details Voucher Amount Travelling Stationery Cleaning Sundry
$ No. $ $ $ $ $